As it is time to start, we will now begin the Conference Call for the Presentation of the Financial Results for Fiscal Year 2024 Third Quarter. Thank you very much for your participation. Today, Mr. Sasaki, Managing Executive Officer, will give a briefing on the financial results for FY 2024 third quarter. Later, he will be joined by Mr. Yamauchi, Executive Officer and General Manager of Accounting Department, to take questions. We plan to conclude the call at 5

50. Now Mr. Sasaki, over to you.

Thank you. I'm Sasaki from Sumitomo Chemical. Thank you very much for attending our conference call despite your busy schedule. I'd like to thank the investors and analysts for your daily understanding and support to our management. I'd like to thank you all for that. Let me start with a briefing of our financial results for FY 2024 third quarter. Please turn to Slide -- Page 4. Before going to the details of our financial results, I'd like to summarize some major points that I'd like you to be aware of about the third quarter. Driven by favorable performance of Sumitomo Pharma and ICT & Mobility, core operating income for the third quarter improved significantly from -- and profit is increasing quarter after quarter. In the same period of the previous year, there was a loss of JPY113.9 billion, but now there is a profit of JPY60.1 billion. Gain on the sale of unprofitable and noncore businesses, which has been promoted as immediate-term concentrated measures to improve business performance, amounted to about 1/4 of core operating income for third quarter of FY 2024. Net income attributable to owners of the parent for the quarter was positive even with a temporary loss of JPY23.8 billion related to the loan to Petro Rabigh. Overall, we are on track to achieve our goal of a V-shaped recovery in performance in FY 2024. Next page, consolidated financial results for FY 2024 third quarter. Sales revenue was JPY1,904.8 billion, increase of JPY98 billion year-over-year. Core operating income expressing recurring earnings power was a profit of JPY60.1 billion, up JPY173.9 billion year-on-year. Nonrecurring items posted losses, such as Sumitomo Pharma's North America business restructuring costs of JPY14.8 billion and impairment loss of JPY5.5 billion. However, the impact of recognizing our interest in Petro Rabigh's debt forgiveness gain of JPY86 billion as a nonrecurring factor and JPY11.5 billion gain on sales of fixed assets, such as dormitories, company housing and other fixed assets resulted in a profit of JPY85.4 billion. Last year, there was a loss of JPY46.8 billion included restructuring costs of JPY25.6 billion with the reorganization of Sumitomo Pharma's North American subsidiary and methionine manufacturing facility impairment loss of JPY15.4 billion compared to previous year. This is an improvement of JPY132.1 billion. As a result, there was an operating income of JPY145.4 billion, a large improvement of JPY306.1 billion year-on-year. For finance income, there was an impact of recording of loss on debt waiver for a loan to Petro Rabigh resulting in a loss of minus JPY105.4 billion, which is a worsening of JPY106 billion year-on-year. Gain on foreign currency transactions included in finance income was a profit of JPY15 billion because of a weakening of the yen, which is an improvement of JPY9 billion year-on-year. As a result, net income attributable to owners of parent for the quarter was JPY28.6 billion, improvement of JPY138.4 billion year-on-year. Exchange rate and naphtha price, which impact our performance, was an average rate during the term of JPY152.64 to $1. And naphtha price was JPY76,500 per kiloliter. The yen weakened and feedstock price increased compared to the previous year. Next is sales revenue by business segment are prepared based on new segments from the third quarter due to the reorganization as of October 1, 2024. Total sales revenue was up JPY98 billion year-on-year. And by segment, sales revenue increased in all segments except for Essential & Green Materials. Sales revenue year-on-year changes by factor are as follows

sales price is up JPY10 billion, volume is up JPY33.2 billion, foreign exchange transaction variance of foreign subsidiary sales revenue is up JPY54.8 billion. Next page. Total core operating income improved JPY173.9 billion year-on-year. Analyzing by factor, price is plus JPY21 billion. Cost is plus JPY97.5 billion. Volume variance, including changes in equity in earnings of affiliates, is plus JPY55.4 billion. Next is performance by segment. Agro & Life Solutions segment. Core operating income is a profit of JPY19.5 billion, improvement of JPY 22.4 billion year-on-year. In price variance, although the selling price of crop protection chemicals fell in the Americas, profit margins improved due to the rising market prices for methionine. For cost variance, impairment on methionine in the first half of the previous year reduced the burden of depreciation expenses. For volume variance, there was an increase in shipments of INDIFLIN, which has a high gross margin in overseas crop protection chemicals, and increase in shipments in India and other regions where the impact of distribution inventory backlogs has lessened. Next page, ICT & Mobility Solutions segment. Core operating income is JPY59.7 billion, up JPY15.8 billion year-on-year. In price variance, selling prices of polarizing films declined. In volume variance, there was an increase in shipments of polarizing films and touchscreen panels. Demand for semiconductors is also on gradual recovery trend. And shipments of high-purity chemicals and photoresists increased. Next page, Advanced Medical Solutions segment. Core operating income is JPY1.9 billion, down JPY1.8 billion year-on-year. Increase in depreciation of new facilities and other factors worsened cost variance. Next page, please. In the Essentials & Green Materials segment, core operating income was a loss of JPY44.3 billion, an improvement of JPY16.2 billion year-on-year. In terms of price variance, profit margin improved due to higher market prices of MMA and petrochemical products. Furthermore, regarding to the volume difference, due to the decline in the refining margin of Petro Rabigh, an equity method affiliated company, and deterioration of profit margin of petrochemical products, there was a deterioration in financial performance. As for the Sumitomo Pharma segment, core operating income was JPY19.9 billion, a significant improvement of JPY116.2 billion year-on-year. The price variance is due to the decline in sales prices due to the impact of NHI drug price revisions in Japan. The cost variance was due to a decrease in SG&A expenses as a result of streamlining business operations through the combination of group subsidiary companies in North America. As for the volume variance, due to the sales growth of the three key products, shipments increased. Furthermore, in the third quarter, due to the transitioning of MYFEMBREE business to be conducted by our company alone, we recorded a lump sum deferred revenue related to the alliance with Pfizer. Please note that the CDMO business for regenerative medicine and cellular medicine does not belong to this segment. And due to the impact of our consolidated accounting procedures, the sales revenue and core operating profit for this segment differ from the sales revenue and core operating income announced by Sumitomo Pharma. This concludes the explanation of the business performance by segment. Next, I will explain the consolidated statement of financial position. Total assets at the end of December 2024 was JPY3,739.5 billion, a decrease of JPY195.3 billion compared to the end of the previous fiscal year. The main factors for the decrease were the debt forgiveness of long-term loans to Petro Rabigh, which are included in Others under noncurrent assets and the sale of Roivant shares by Sumitomo Pharma. Interest-bearing liabilities was JPY1,443.7 billion, a decrease of JPY119.8 billion compared to the end of the previous fiscal year. As a result of the -- next, I will explain the consolidated statement of cash flows. Cash flows from operating activities was JPY140.7 billion inflow, an increase of JPY275.7 billion year-on-year. This was mainly due to the improvement in income before taxes. Cash flows from investing activities was positive JPY56.7 billion, an increase of JPY134.5 billion year-on-year. This was due to the income from the sale of Roivant shares by Sumitomo Pharma and the sale of shares in Sumitomo Bakelite as well as the sale of fixed assets, such as company dormitories and housing. As a result, free cash flow was positive JPY197.5 billion, an improvement of JPY410.2 billion compared to the JPY212.8 billion negative figures in the previous fiscal year. Next, I will explain the full-year outlook for fiscal year 2024. I will start by explaining the business environment surrounding our company. In terms of the economic situation, with uncertainty continuing over financial markets and policy management, the growth rate is expected to remain at a low level. Below that, we have used weather symbols to indicate our perception of the business environment in our main business fields. As for crop protection chemicals, at the top, although the stagnation of the overseas distribution inventory is gradually being resolved, the selling price is falling due to intensifying competition. As for methionine, higher market prices that continued from the previous year will hit a lull and it is anticipated that it will decline in the second half of the fiscal year. As for displays, there will be a strong demand for mobile-related devices. Demand for semiconductors will show signs of gradual recovery. Low margins continue in the petrochemical and raw materials markets. Please look at the next page. The performance forecast for FY 2024, it seems that there will be an upside. However, it has not reached the threshold number for revision so it is unchanged from the figure announced on October 30, so sales revenue of JPY2.6 trillion and core operating income of JPY100 billion and operating income of JPY180 billion. Net income attributable to owners of the parent is JPY25 billion. The assumptions for exchange rates and naphtha prices have been revised as stated based on the current situation. Furthermore, we have revised the breakdown of core operating profit loss by segment from the forecast announced as an image on October 30, and I will explain this on the next slide. With regards to the dividend forecast for the current fiscal year, we will maintain the same forecast as the previous forecast announced on October 30 with an interim dividend of JPY3 per share, year-end dividend of JPY6 per share and the annual dividend forecast will be JPY9 per share. This will be the last page. The table compares the forecast announced on October 30 based on the image of the new segments. The top, Agro & Life Solutions, has factored in a decrease in crop protection chemicals shipments in South America due to poor weather and a fall in the price of methionine, resulting in a deterioration of JPY7 billion in core operating income compared to the initial forecast. ICT & Mobility Solutions is performing steadily. Though Advanced Medical Solutions is also performing steadily, JPY2 billion has been reclassified due to a change in segment following the transfer of shares in Nihon Medi-Physics. Essential & Green Materials has revised its forecast downward by JPY14 billion due to a deterioration in the refining margin at Petro Rabigh, a decrease in shipments of synthetic resin and a deterioration in profit margin. Sumitomo Pharma has revised its forecast upward by JPY23 billion due to an increase in shipments of its three key products, progress in streamlining SG&A and R&D expenses as well as the impact of changing the segment of RACTHERA. As explained, breakdown by segment has changed, but group as a whole we will be working -- been working on immediate term to improve business performance. Up to the third quarter, we feel that we have been progressing steadily to achieve the full year targets. That concludes my explanation.

Thank you very much. [Operator Instructions]. The first question is from Morgan Stanley MUFG Securities, Mr. Watabe.

Thank you for presentation. I'm Watabe from Morgan Stanley. I have one question. You mentioned JPY100 billion operating income. You expect a better result. But for October -- compared to the image of October, you believe there is going to be no major change in terms of JPY100 billion. What type of upward trends for JFE Sumika engine was sold? Is that a factor? And in the third quarter to the fourth quarter, Agro seems to be doing well, but ICT & Mobility and Essentials also was good in Q3, but it's quite worse in Q4 according to your forecast. Could you explain that?

Thank you for your question. First, about our forecast, this remains unchanged. And the background is that when we make our forecast, we expect some upwards versus how we see. Foreign exchange rate, yen is slightly weakening. That is one factor. And in addition -- on other hand, even now there are higher uncertainties, our predictability is getting lower. Looking at such a situation, upward revision, we thought, is not going to be done. So, we kept our forecast unchanged. And your question like for how to look at the Agro business -- Agro sector, for this sector, from Q3 to Q4, in general, we expect an upward situation, slightly more than JPY30 billion. In Q4 last year was also about JPY30 billion. So, I don't think it is that different. And that is one background. For ICT & Mobility, from Q3 to Q4, for ICT & Mobility, from the first quarter, the performance was quite at a high level. So, looking only at the third quarter, it is slightly lower than last years. But as always, in the fourth quarter we expect some decline. And of course, compared to last year, yen is weaker. So, if that situation continues, that may be a positive factor. But in general, that is how we look at the situation. So, I don't know if I was able to answer your question, but that is my answer.

Well, for Essential, is it good because some special factor in the third quarter? What's the situation for the fourth quarter for Essentials?

In a sense, there were some divestitures in the third quarter, which was a positive factor to a certain extent. But in principle, there are not so many good factors like the margin level is low, such a situation is continuing.

Thank you, very much. Looking at the share price today, you are keeping the forecast. So, it looks as if you just kept it without making any reviews. But looking at the material, it seems that you reviewed the situation and you decided to keep it unchanged and maybe that is something that affected the market situation, but I ask this question because I wondered why you were having upward an forecast.

We would like to take the second question. Mizuho Securities, Mr. Yamada. Please go ahead.

This is Yamada from Mizuho. My first question is regarding the growth driver. Agro & Life Solutions, the fourth quarter you are forecasting that it will be in line as last fiscal year. INDIFLIN should be expanding. And the inventory adjustment in India has been progressing and [indiscernible] is also going to contribute. So, I just want to know how you are looking at this. And also, ICT & Mobility Solutions, which is another growth driver, for this one, the third quarter, as you said, if you look at the 3 months year-on-year, it seems that there has been a slightly compression. However, is there a time difference of a shipment that went into the second quarter? Or are there any other concerns, please let me know.

Thank you very much for your question. Regarding Agro & Life Solutions, from the third quarter to the fourth quarter, the factors that you have mentioned, India being good. And including North America, the stagnant inventory are being resolved and that concern is heading towards the direction of being solved, and that is reflected. After the third quarter, there was an impact from South America and it was slightly slow. However, moving forward, the North America and others will perform to a certain extent. And as for South America, as you have pointed out, the new product will gradually increase. So, there is some issue of seasonality. However, the drought of South America, we think that it is going to gradually be resolved. So, towards FY '25, we believe that it is going to improve. And also related to ICT, as I have mentioned before as well, from the first quarter, there were quite of front-loaded matters. Therefore, the first or the second quarter, the first half was performing strong, so compared to that, the third quarter, before the -- well, in the second quarter, there were some positive factors that were in the second quarter. So, the fourth quarter you may think that it is going to perform quite solidly. However, when we think about the seasonality, we think that it is around this level, especially it's not the case that there are special factors. I think I would like you to understand it that way.

Agro & Life Solutions, this time you have declined from the image that you spoke before. Are there any concerns that you have?

The reason why we have declined it is because basically South America, due to the bad weather, was not performing that strong and also methionine price is slightly going down, and those were factored in. But other than those factors, there are no significant factors.

Okay. Understood. I do expect over-performance. And also, onetime factors, the impact of that to the core operating income, the third quarter year-to-date third -- 3 quarters, it's about JPY15 billion and Sumitomo Chemical engine factors in, so it's about JPY57 billion in total. So, as you said at the beginning of the year, compared to that assumption, it seems that it is lower than that. So, what you said at the beginning of the fiscal year, is it lower than the amount that you have shared at that time? I just wanted to confirm.

What you have said, what is missing is that I believe it was in December, Nihon Medi-Physics-related matters, that's about JPY30 billion impact. I believe I have announced that. Other than that, as I have briefly mentioned before, at the Essentials & Green Materials, the aluminum-related business was divested. So that is why we're seeing some upside. But if we add all those, originally, it was about JPY60 billion. I believe that we are still in line with that. Nihon Medi-Physics divesting and Sumika engines sales because of that, the total up to this number, the original JPY60 billion includes those. That is the assumption. So, you are understanding correctly.

Medi-Physics, that's included in Others for the fourth quarter. Correct?

Yes.

And Sumika engine is included in Others. So, it's about plus JPY42 billion should be generated. Fourth quarter year-to-date numbers compared to that, it seems quite lower.

Well, the Others, maybe it's better that I explain. First of all, Sumitomo Pharma, that number of that segment is JPY24 billion. And Sumitomo Pharma themselves, what they announced the number, I believe, was JPY30 billion. And the difference between the two numbers is that RACTHERA, the joint venture company, Sumitomo Chemical will hold the majority. Therefore, RACTHERA, as originally announced, the expenses will come out first. So, that expenses part is not in the segment from Sumitomo Pharma, but it has transferred over to Others. That is why for the regenerative and cell therapy medicine due to the segment change in RACTHERA, this is the result and I have explained that in the slide, and we are assuming such thing. And other than this, the corporate research and development, those type of expenses is also included in Others. So overall, for Others, the numbers that were posted there was a negative number. However, we had some divestitures, so that is why this part this time is a positive number. There are some areas that we are looking at in a conservative manner, meaning the money amount, the core, we're saying it's JPY100 billion. So, we kind of rounded up or some adjustment factors are also included in the number.

Next is from SMBC Nikko Securities, Mr. Miyamoto.

Thank you. I'm Miyamoto from SMBC Nikko Securities. My first question is about Agro & Life Solutions. From the second quarter to the third quarter, sales increased but profit declined. Could you give me the details? For example, on Page 16, the weather chart, because of stronger competition, you say selling price decreased for the first and the second quarter. Also did the price drop? And for volume for crop protection chemicals, in terms of volume, there is an increase looking at the sales figures. What were the changes that happened? And related to that, about the inventory level, India is getting better. In North America, backlog inventories are lessened. So, what is the situation in South America? What is the situation of inventories?

Thank you for your question. The sales trend and the profit trend are different, that was your question. In principle, there is a different profit margin among the products. This is a difference of composition of products. There is a difference if there are more products with low margin, this is what happens and that is how you should interpret. Basically, crop protection chemicals itself, India, North America, the backlog inventories are declining. And in South America, because the impact of the drought compared to other regions, it is different. It will take more time to resolve the issue of the backlog inventories. However, bad weather will not continue every year, that is what we think. So, towards 2025, we believe there will be improvements.

Thank you, very much. So, the product composition INDIFLIN biorational, if such products increase, I believe there will be improvements. And in Q3 there was some drop at the time of shipment, but that will not happen in Q4?

Yes. For example, in South America, INDIFLIN, our new product, if they are sold as scheduled, the profit margin would have been better. But maybe that is an area that was weak and that may be one reason why profit margin is low compared to sales.

I understand. Thank you, very much. My second question is about Essential & Green Materials. From the second quarter to the third quarter, there was an improvement of JPY5.6 billion. And in Petro Rabigh, losses increased. But despite said, there was a large improvement. There was onetime factors as well. But I think there are other improvements. So, what is the scale of a onetime factor? And what are the factors for the improvement?

Business divestitures, detailed data, we have not disclosed that much about that information. But up to the third quarter, sales of businesses is about 1/4. And out of that, those included in the Essential sector would be about 30% of that. And basically, Petro Rabigh -- for Petro Rabigh, that was waived and interest rate burden is declining. But still in the current environment, the situation is not good.

On the other hand, in other areas, there are some areas with some improvements. Compared to the first and second quarter, there are some areas that are better. But will the improvement continue?

It's very difficult to make any projections about that. There are some areas where some improvements, and we hope the improvement will continue as much as possible.

I see. By accumulating small efforts, I think that is leading to improvement of cost, right?

Well, in Japan -- including Japan and Singapore, we are going on with cost reduction efforts, which could also be considered to be included.

Next, Daiwa Securities, Mr. Umebayashi. Please go ahead.

Thank you, very much. I'm Umebayashi from Daiwa Securities. I have a question related to ICT & Mobility Solutions. Regarding the sales from the second quarter to the third quarter, the sale has gone up, but the profitability went down. For the sales due to the foreign exchange rate, it seems that on surface, it is boosted up. However, the profit decline seems large. So, I would like to know the reason behind that. And the ICT and -- research is moving forward, but the Mobility, what is going on with that? If you can explain that part as well, that will be appreciated.

It is a question related to ICT. First of all, I think you asked about the question regarding Mobility at the end. And Solutions regarding products as such, it was kind of weighted more in the first half of the year. So, I believe the second quarter may slow down or it might go into the adjustment phase. And also, display-related matters, mobile is strong to a certain extent. But as mentioned before, in the first quarter and the second quarter, it was more of a weight on those two quarters. And that is probably impacting the margin is how we look at it. Regarding the products related to semiconductors, I should say they're still performing. Of course, there are ups and downs depending on the product, but I believe that it is rather satisfactory. So, we believe that moving forward, they are going to further perform better. Having said that, as of the third quarter, they are showing recovery. However, it is not to the level that we have expected. It was a gradual recovery.

I just wanted to confirm, as for the sales revenue, on surface, it seems that it's flat. But in reality, if you exclude the foreign exchange impact, it has slightly gone down. And for the profit, as for ICT or as for Mobility, it is a bit weak and the product mix has deteriorated and it is showing a decline. Is that the correct understanding?

Yes. With that understanding, overall, I think it is good.

Thank you, very much. My second question is I just wanted to confirm. The other day at Petro Rabigh, there was a news release related to restructuring. And that is -- the content of that is no different than what you have explained. I just wanted to confirm that. And at Sumitomo Pharma in the briefing session material, they are going to extend the bridge loan to March. And for the other finances, they are in the process of planning with the financial institutions and your company. So, if you have something to add, can you please explain?

Related to the Rabigh-related matters, well, we have announced in August to forgiveness of their debt. And so, in August and January of this year, we also waived the debt as well. So twice, there was a debt forgiveness of $500 million and $250 million. So, I believe that was the comment of the announcement. And other than that, they have not made any additional announcements is our understanding. For example, transfer of shares, so we will drop to 15% from the 22.5% of the transfer. From the regulatory authority, it has not been approved. Therefore, we are continuing to put our efforts in the negotiations. I think I would like you to understand it that way.

Thank you, very much. Is there anything else that you can comment related on Sumitomo Pharma?

37.5% is still the situation. But if it's led from Aramco, I believe that there may be various measures that we can implement, but we have not reached the timing of making announcements. So, the refinance of Sumitomo Pharma, it says that -- so regarding Sumitomo Pharma, we are considering and negotiating -- in the midst of negotiating on various things. And on Friday, we did explain that we are under negotiation with the bank side. So, what we can actually share with you is to that extent as well. And regarding the content of this, if there's something that we can further share, we would like to share that at an appropriate timing.

We are approaching the end. And next, it will be the last question. Mr. Watabe from Morgan Stanley MUFG Securities.

There was an announcement of a change in the president. Do you have any comments about it?

Thank you for your question. There is nothing in particular to comment from me. Today, from 3

30, there was a press conference about the change in the President. There may be some press reports tomorrow. But basically, there are questions about what we stated in the press release and the process of selection as well included. A more detailed presentation was made by the President, but in principle it is as was mentioned in the press release. There is nothing particular to add from me. I appreciate your understanding.

Yes. One more question. In the first half, when you changed the segment, Sumitomo Pharma was included under Others, but now Sumitomo Pharma is one independent sector. So, did your view about it change or is it just to make it easier to see?

So, we have four sectors. We reorganized into four segments, including Agro to Essential. And under Others, there are a few under Others. And under Others, Sumitomo Pharma is very big. So, to a certain extent, it is too big to be included under Others. So, it's now an independent segment. And now Sumitomo Pharma's reorganization is something that we are focusing right now, and that is something that we wanted to appeal. So, this is now treated independently. In terms of the process of consolidation or -- the regenerative cell may be a slightly different segment. These are some other factors. So, it's a little complicated. But basically, this is a disclosure according to the rules. This is how you should interpret it.

So, there are no major changes, but it is going to remain. It's not that it's going to remain because it's getting profitable?

Well, basically, in April last year, the President, Mr. Iwata, explained that in selling our equity and lower our equity, that is not the purpose. What is most important for Sumitomo Pharma is what we are focusing on. That is how it was explained. Of course, we will consider multiple options going forward. But first of all, before that, we must stop the bleeding and this must recover to a normal situation in order to be able to consider these possibilities. So, reorganization has priority. That is how I understand.

Thank you very much. With this, we would like to conclude the question session at the end. Managing Executive Officer, Sasaki, would like to say closing remarks.

Thank you very much. We are aiming for a V-shaped recovery, and we've been implementing various initiatives to achieve that. And we are starting to see some outcomes from that to a certain level. Having said that, depending on who you speak to, some may say that it is not still at the expected level. But we are starting to see certain results. Therefore, we would like to continue to focus on realizing the immediate-term concentrated measures to improve business performance and fundamental structure reforms. Thank you very much for your participation today.

With this, we would like to conclude today's conference call. Thank you very much for participating today.